“When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments.” – Prime Minister Stephen Harper, Dec. 7, 2012

Late on Friday afternoon, after the markets had closed, Prime Minister Stephen Harper announced that the federal government will allow the Chinese National Off-Shore Oil Corporation to purchase Canada’s Nexen, thereby converting Nexen into a Chinese state-owned enterprise. In the same breath, however, he also said there will be no further Chinese state acquisitions relating to Canada’s oil sands.

Nexen process operator Terry McCall tightens a valve on this well head while working at Nexen's Phase 1 Long Lake SAGD processing facility near Fort McMurray.
Nexen

China in the oil patch

After months of debate in the media, and strong opposition from most Canadians, the decision to approve the Chinese state purchase of a Canadian company this one last time should mitigate against angry diplomatic retaliation by Beijing. But in reality it is hard for Beijing to protest a decision limiting China’s future investments in Canada when China would never allow foreign acquisition of its own major firms, especially in the energy and resource sectors that China defines as critical to its national security.

Moreover, the “Statement Regarding Investment by Foreign State-Owned Enterprises,” issued by Industry Canada minutes before Mr. Harper’s announcement, goes a lot further in promulgating rules to protect Canada’s economic sovereignty. For instance, it indicates that in applying the Investment Canada Act, the federal Minister of Industry will carefully monitor state-owned enterprise transactions throughout the Canadian economy to determine if they are of net benefit to Canada.

It also says the minister will scrutinize how much control or influence any state-owned enterprise might exert on Canadian businesses being acquired; how much the state-owned enterprise might influence the industry in which the Canadian business operates; and how much a foreign government might control the state-owned enterprise acquiring the Canadian business.

In other words, whenever acquisitions by state-owned enterprises could undermine the private-sector orientation of an industrial sector– and subject it to foreign state influence – Ottawa will act to safeguard Canadian interests.

The bottom line is clear. If China were to follow up its Nexen acquisition with other large investments and become a significant player in Canada’s economy, the consequences go far beyond simply which nation would benefit economically from Canada’s resources.

It would also give China considerable leverage over Canada’s policies on the environment, or labour standards. And the Chinese Party-state would naturally demand that Canada stop voicing concerns about issues that matter to most Canadians, including China’s repressive policies in Tibet and Xinjiang; Chinese state harassment of Tibetans, Uyghurs and supporters of Chinese human rights and democracy in Canada; Chinese espionage, including computer hacking leading to theft of Canadian intellectual property and strategic technologies; and China’s support for rogue regimes – such a s North Korea, Iran, Sudan, Zimbabwe or Venezuela – that threaten world peace.

In 2006, Mr. Harper said, “I think Canadians want us to promote our trade relations worldwide – and we do that – but I don’t think Canadians want us to sell out important Canadian values. They don’t want us to sell that out to the almighty dollar.”

Six years later, in an increasingly complex diplomatic environment, it seems his position still holds true.

Charles Burton is an associate professor of political science at Brock University in St. Catharines, and is a former counsellor at the Canadian embassy in Beijing.

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